While the continuing slow, steady improvement in the job market will gratify the administration and the Federal Reserve, this trend has masked the emergence of a new marginalised ‘underclass’ of 4.6 million workers unemployed for at least six months. As a percentage of the workforce, this exceeds the level of long-term unemployment during post-recession recoveries over the past 70 years, and could serve as a long-term drag on growth.

The negative impact of long-term unemployment is likely to endure, slowing growth over time.

More than any other period in the past century, the current job market most resembles the mid-1930s, when renewed economic growth did not produce rapid reductions in unemployment. This is, in part, due to skills mismatch, and, in part, due to skill attenuation — two factors that help produce worker marginalisation.

Even as overall joblessness declines, the number of long-term unemployed is likely to continue rising for much of this year. Young workers will be the worst affected; research shows that an extended period of unemployment early in life will have a very negative impact on these individuals’ long-term earnings prospects and tax contributions, inhibiting US growth and fiscal consolidation efforts over time.